Guatemala’s Ministry of Energy and Mines has amended 30 articles of the country’s mining law, a development that requires 147 companies with operating licenses to pay new royalty rates.
These amendments replace the voluntary agreement signed earlier this year between miners and Guatemala’s President Otto Perez Molina.
Companies exposed to Guatemala include Goldcorp. Inc. (TSX: T.G, Stock Forum) (NYSE: GG, Stock Forum), Tahoe Resources Inc. (TSX: T.THO, Stock Forum), Radius Gold Inc. (TSX: V.RDU, Stock Forum) and Firestone Ventures Inc. (TSX: V.FV, Stock Forum).
Gold and silver miners are voluntarily paying royalties of 4%, base metal miners pay 3%, and miners of industrial minerals pay 1%.
Clarity has not yet been provided as to whether these rates change, writes Canaccord Wealth Management in its Morning Coffee report. However, it appears that the amendments just solidify the existing voluntary royalty rates.
The amendments also establish a mining fund that dictates where royalties collected will be allocated. That would be 35% to the community where the mine is located, 20% to surrounding communities, 20% to the Ministry of Social Development, 20% to a natural disaster fund, 3% to the Ministry of Energy and Mines, and 2% to the Ministry of Environment and Natural Resources.
Legislation has also proposed the creation of a state mining company to encourage participation in mining and oil projects. However there is as yet no clarity on the level or participation or structure of deals provided to date, Canaccord writes.
Finally, the amendments also included the creation of a national system of mining information, crackdown on illegal mining, and waste disposal, and creation of a mining council for strategic planning.
When a country like Guatemala introduces “new royalties,” the associated headlines are rarely well received by the market, Canaccord writes.
However, the investment firm said that in this case, a Bay Street analyst views this legislation as positive because it formalizes the voluntary royalty structure established through negotiation between industry and the Guatemalan government.
“The amendments also demonstrate progress within the Ministry of Mines, which he [the analyst] believes could pave the way to final permitting of new projects.’’